The Hotel Employees Provident Fund, the third largest pension fund with EUR 240 mln in assets is seeking to diversify and increase returns in order to meet the expectations of its members, said Marinos Gialeli, the Funds General Manager.
Gialeli said the Hotel Employees Provident Fund may be the third biggest in terms of assets, but is the first in terms of number of members, with current membership at 14.800 and 200 hotels participating in the Fund.
Gialeli told the Financial Mirror that after delivering annual growth of on average 6-7%, a decision has been taken to reduce the high allocation to bank deposits, which on average at Cyprus pension funds exceeds 85% and proceed with a balanced diversification.
“Our new investment strategy will be to invest 55% in bonds and cash of which 10% will be in global bonds, 15% to invest in equities of which 10% will be beyond Cyprus and Greece, 15% in Real Estate and Hedge and another 15% loans to members,” said Gialeli, adding that, “our goal is to maintain a total return of 6.5% with 3.5% volatility per year.”Â
Management will review its strategy every year. Referring to previous returns, Gialeli said during the last three years the rolling returns were 5,10% and over the last ten years the rolling returns were 6,30%.Â
“This year we expect a satisfactory return on the back of the increase of the Cyprus Stock Market which was the second best performing stock market in the world after Peru.”
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Innovative
The Hotel Employees Provident Fund is probably one of the few funds that has been innovative and willing to change and keep up with fast changing developments occurring both locally and globally.
During the last three years, Gialeli introduced many changes, starting from the little things such as moving to new offices, a new logo to the more complicated things like adopting a new investment for the fund.
“We try to be transparent at all levels in our dealing with members,” said Gialeli, adding that the Fund has introduced and adopted many features of a corporate governance code.”Â
“We have developed a web site with all the information that our members need and we are in the final stage for the development of a secure portal where our members will be able to view their accounts through the internet.”
Other services include the publication of a magazine once a year which goes to all members containing all the information on activities held during the year, as well as the publication of an annual report.Â
“We are also on the process of providing a 24 hours call centre which is going to be ready next year,” added Gialeli.   Â
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Advisors
The Hotel Employees Fund has also decided to adopt the investment rules that pension funds in developed countries follow as part of its drive to modernise itself and adopt to new concepts.
Gialeli noted that the Fund has developed a strategic asset allocation process for the first time, based on the fundamentals of the fund after a complete and extensive study. “We have hired a well known investment consultant firm to help us on the education of the trustees, which was a very hard topic for us.  The consultant will also help us to implement our strategy by choosing the best fund managers worldwide for our fund. We are planning to give mandates to the fund managers for the Equity and the Bond portfolio. For the Equities we are planning to give discretionary mandate and for the Bonds will be against the LBGAI index, always under custodian rule and our Board Committee supervision.”
“We want to choose the best institutional fund managers and we will make sure everything will be transparent at all levels with the entire fees reported to our members.”
Knowing that members are not in a position to accept negative returns, Gialeli said the Management committee of the Fund has decided to proceed in a slow and very conservative way in order to minimize the volatility of the fund and its returns, but certainly insist to carry on with its diversification process, in order to maximise the benefits for its members.   Â
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